Europe’s Online Music Market Eases Out of the Starting Blocks

Itís been a busy week in the European Online Music Industry. Or at least it would appear to be: many of the press releases have actually been more of an update on whatís been on the verge of fruition for some time (e.g. Wippitís deal with EMI).

But does that mean that the European music industry is stuck in second gear? Yes and no: the current raft of European services are unquestionably less comprehensive than the US services and stores such as Napster, iTunes, Rhapsody and MusicMatch. But the limitations arenít in the quality and design of the services, but instead primarily on the usage rights associated with the content or the depth of catalogue available. For example, the lionís share of the tracks in the MyCokeMusic store arenít available for transferring to portable devices. A little odd considering it is an a la carte download storeÖ

But all that doesnít mean that things arenít moving on. Roxio and Apple are the two highest profile companies trying to bring their particular services to the European market. But because of a plethora of factors (including a fragmented rights landscape, disparate broadband penetration, differently performing music markets etc.) it is likely both will initially focus on key markets rather than a pan-European basis. Napster have gone on record saying that they will initially launch in the UK.

Is this bad news? No, there simply isnít the same level of demand in all European markets. In a report which I have just written, I identified that there is a clear geographical hierarchy of opportunity for digital music services, ranging from North to South, with Italy and Spain representing the lowest degree of opportunity. The UK is a natural launching point.

But before consumer demand can be converted into consumer activity, the licenses and services need to be in place and that is happening now. Although little has changed on the surface in the last 6 months, lots has been happening behind the scenes. The labels are working hard to make larger proportions of their catalogue available for digital distribution (non more so than EMI, who I have mentioned before in the is weblog as being the trailblazers in Europe). I fully believe that in the build up to Christmas this year European consumers will have a choice of high quality services in key markets such as the UK.

I also believe that US companies wonít have it all their way. OD2 are the leading player in the European market and I full expect their services to be enriched in time for Q4 rush, with their extensive network of ISP deals giving them an advantageous direct route to market. Wippit also shouldnít be underestimated. The EMI delay will hopefully be the first of other major label deals and Wippit will want to see themselves firmly established as a compelling European alternative to the American services by the time they launch.

The European market is finally getting out of the starting blocks and all the parts of the puzzle are finally falling into place:
∑ the record labels recognise the value of the Internet as a distribution and marketing channel and are working towards getting the right types of licenses in place
∑ recorded music sales are beginning to pick up
∑ the installed base of portable music players is growing
∑ new services are coming into the fray
∑ existing services such as Wippit are gaining momentum
However, there is some way to go before all those factors translate into the home straight and there will be plenty more frantic wheeling and dealing behind the scenes before we can say that Europe has finally caught up with itís trans-Atlantic neighbour.

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